Stella-Jones Inc. (SJ) Earnings Call Transcript & Summary

Good morning. [Foreign Language] Kate Lehman, and I'm Chair of the Board of Directors of Stella-Jones. On behalf of the members of our Board, and our more than 3,000 employees across Canada and the United States, I would like to welcome you to our Annual Meeting of Shareholders, and I thank you for joining us here today, whether in person or virtually. I will begin by introducing the members of the Stella-Jones senior management team who are sharing the stage with me today. You will get to hear from them during the meeting, and there will be an opportunity to ask questions following their prepared remarks. First, I'd like to introduce Eric Vachon, President and Chief Executive Officer of Stella-Jones. Mr. Vachon also serves as an Executive Director of the Board. Joining Eric are Silvana Travaglini, Senior Vice President and Chief Financial Officer; and Marla Eichenbaum, Vice President, General Counsel and Secretary. I also wish to welcome the nonexecutive members of our Board of Directors, who will be presented for re-election. I would like to invite them to pleas stand up when I call their names, Michelle Banik, Robert Coallier, Anne E. Giardini, Karen Laflamme, Simon Pelletier; and Douglas Muzyka, who is unable to join us today in person. I wish to take this opportunity to recognize 2 outgoing Board members and thank them for their invaluable contributions to Stella-Jones over the years. Beginning with Jim Manzi, who in his 10 years on the board, helped set the foundations of a more performance-based and accountable global compensation approach for the organization. And I'd also like to thank and recognize Rhodri Harries, member of the Board since 2020, who will not be seeking re-election this year. Rhodri's input has been indispensable to our Board, particularly in his role as a member of our audit and environmental health and safety committees. On behalf of the entire Board of Directors. Thank you. And of course, I'd like to recognize Stella-Jones leadership team and its outstanding employees, a number of whom are also in attendance today. And I'd like to welcome Wesley Bourland, who has recently been appointed to the role of Senior Vice President and Chief Operating Officer of the company. Welcome Wes. Please note that comments made in today's presentations may contain forward-looking information, and this information, by its nature, is subject to risks and uncertainties. Actual results may differ materially from the views expressed today. Additionally, during this presentation, the company may refer to non-GAAP measures, which have no standardized meaning under GAAP and are not likely to be comparable to similar measures presented by other issuers. For further information on these risks and uncertainties, please consult our relevant filings on SEDAR+. Before proceeding with the formal portion of today's meeting, please allow me to share a few words about our performance over the last year. In 2024, Stella-Jones continued to focus on initiatives aimed at leveraging favorable industry trends to drive profitable growth. The company maintained its approach of securing longer-term customer agreements, while enhancing overall capacity and efficiency throughout its network, and continuing to deliver unmatched customer service. The Board of Directors also continued in its mission to refine and enhance corporate governance strategies. This was -- this focus on continuous improvement was evidenced by a number of initiatives over the past year. Starting with the application of share ownership guidelines for senior management that were adopted in 2023. In 2024, we launched an official policy governing these guidelines, further bolstering the alignment of our leadership team's interest with those of our shareholders. Additionally, our Governance and Nomination Committee expanded the Board of Directors' minimum share ownership requirements to be based on both the value of our cash compensation and deferred share unit grants. The introduction of a committee chair rotation policy in 2024 allows each committee of the Board to benefit from fresh perspectives and insights, while contributing to succession planning. Anne Giardini was named Chair of the Governance and Nomination Committee, succeeding Simon Pelletier, and Robert Coallier was added as Vice Chair of the HRCC, preparing him to take on Jim Manzi's Chair role upon his retirement from the Board. We look forward to their continued contributions to their respective committees and to our company. Today, Stella-Jones is proposing 8 nominees to its Board of Directors. Excluding our President and CEO, Eric Vachon, all our independent, and 4 of 8, or 50% are women. I take great pride in our board composition, which brings together experienced executives with diverse skill sets and a variety of backgrounds. To this end, we revised our Board skills matrix to emphasize increasing relevance to climate change, cybersecurity and artificial intelligence in a rapidly evolving environment. This update, along with our continued board training efforts, reinforces our commitment to enhancing oversight and ensuring that the Board is outfitted to provide guidance on emerging challenges and landscapes effectively. In addition, we maintain our commitment to managing risk and ensuring the viability of our business, and members of -- of the management team and of the Board participated in dedicated crisis management planning training in 2024. Together with continued on-site plant visits, the Board is committed to engage in training and initiatives that further our understanding of our business and enhance our readiness and adaptability. Finally, over the past year, the company made significant efforts to strengthen its relationships with the financial community, many of whom are here today. In support of these efforts, the Board engaged with investors representing approximately 25% of our shares outstanding. In addition, the management team conducted proactive outreach to both existing and prospective shareholders, fostering transparency, and providing updates on the company's strategic direction. These efforts reflect our commitment to maintaining strong ongoing dialogue with our investor base and ensuring they remain well informed about the company's performance. These initiatives, amongst others, demonstrate our Board and team's dedication to continuous improvement and to ensuring Stella-Jones is prepared for the future by prioritizing adaptability and development we position ourselves for sustained growth and long-term success. In closing, on behalf of the Board, I would like to thank our employees for their ongoing efforts and dedication as well, as our leadership team for fostering a culture of continuous improvement across the business. And of course, thank you to our shareholders, our customers and suppliers for their ongoing support as well. [Foreign Language]. I will now move to the formal portion of the agenda. Pursuant to the general bylaws of the corporation, I will be acting as Chair of today's meeting and Ms. Marla Eichenbaum will act as Secretary of the meeting. Mr. Steve Gilbert and Ms. Carine Laberge of Computershare Investor Services, Inc., the transfer agent and registrar of the corporation, will be acting as today's scrutineers. While management holds proxies representing over 88% of the votes in favor of all matters, which would normally allow us to conduct votes by a show of hands, the virtual participation requires us to conduct the votes by ballot. We will announce the preliminary results of voting on each resolution prior to the close of the meeting, with final results of each of these matters to be filed on SEDAR+ as soon as they are available. Please pay attention to the following voting instructions as they will be used for every item requiring a vote at today's meeting. For those attending the meeting virtually, who are registered shareholders or duly appointed proxy holders, and who have not already voted by proxy, voting will be conducted via the online platform following the steps displayed on your screen. You can now vote on each resolution until the closing of the vote after the last resolution. You will be notified when the voting period is over. For those attending the meeting in person who are registered shareholders, or duly appointed proxy holders, and who have not already voted by proxy, if you -- if you registered with Computershare upon your arrival, you will have been provided with a tablet. If you are not registered with the scrutineers or if you have not received a tablet, please go to the scrutineers table for assistance. If you have already voted by proxy prior to the meeting in any manner, there's no need to enter a vote. You should only enter a vote by poll or voting tablet today. If you wish to change your previous vote, given that if you vote again, only your vote cast during the meeting will be counted, and the vote that you previously submitted by proxy will be revoked. Once discussion on all items of business have concluded, I will take a short pause to allow you to record your vote on the online platform, or on the voting tablet as applicable, in case you have not done so and then I will declare voting closed on all matters. I would like to remind you that registered shareholders and duly appointed proxy holders are the only persons allowed to and entitled to vote or ask questions during the meeting. Shareholders and duly appointed proxy holders attending the meeting in person may address the meeting when there is a request to discuss a motion before the meeting. For those joining us virtually, you'll be able to do so by selecting the messaging tab on the online platform. To avoid delays, please provide your questions to us as soon as you're logged in, and we will address each of them at the appropriate time during the meeting. I will pause for 5 seconds after asking if there are any questions on a particular motion to take into account any delays we may experience. Ms. Stephanie Corrente, Director, Corporate Communications for Stella-Jones will monitor all questions that come in and submitted through the virtual platform, and Ms. Marla Eichenbaum will read them out loud for the benefit of both the in-person and virtual audience. Each question will then be answered by the appropriate individual. A general question-and-answer period with respect to questions submitted that do not relate to an item on the agenda for business will take place after we have addressed all the matters to be submitted to a vote today. The secretary has informed me that the notice of this meeting, the management information circular and forms of proxy have been sent by Computershare Investor Services Inc. to the shareholders of record as of March 14, 2025. Copies of such documents are also available at the scrutineers table, as well as electronically on Stella-Jones profile on SEDAR+, and Stella-Jones website and for notice and access at www.envisionreports.com/SJI2025. I've been informed that we have a quorum at the present meeting, and I invite Mr. Steve Gilbert to please report -- read his report regarding the attendance.

Good morning, Madam Chair. We, the undersigned scrutineers from Computershare Investor Services, hereby report that there are at least six registered shareholders and/or proxy holders present at this meeting, representing in person or by proxy at 44,414,244 shares or more precisely, 79% of the total issued and outstanding 55,652,232 common shares of Stella-Jones, Inc. Thank you.

Thank you very much. Since we have a quorum, I hereby confirm that this meeting has been duly constituted and that we may proceed with the holding of the present meeting. The scrutineers' report will be given to the secretary of the meeting and attached to the minutes of this meeting. Please also note that you could obtain the minutes of the last annual meeting upon request to the Secretary of the corporation. We will now open the polls for the election. The resolutions pertaining to the election of directors, the appointment of auditors and the advisory vote on the corporation's approach to executive compensation. I refer you to the consolidated financial statements of the corporation and the independent auditor's report for the year ended December 31, 2024. These were included in the corporation's annual report mailed to each shareholder who requested and they are also available on Stella-Jones' SEDAR+ profile, its website, and through the dedicated notice and access site. We understand that you reviewed these documents, and we will therefore not ask the Secretary of the meeting to read them. Are there any questions from our in-person shareholders on the financial statements? Madam Secretary, have any questions been submitted online regarding the financial statement?

[Interpreted] Madam Chair there are no questions asked on the electronic platform.

There being no further questions, I hereby declare that the annual report with the consolidated statements of financial position of the corporation, as well as the consolidated statements of change in shareholders' equity, the consolidated statements of income, the consolidated statements of comprehensive income, the consolidated statements of cash flows, and the note to the consolidated financial statements, as well as the independent auditor's report thereto annexed have been received by the shareholders of the corporation. The next item of business is the election of directors. The number of directors have been fixed at this meeting at 8. Information regarding each nominee has been set forth in the management information circular for this meeting, and we will be nominating and approving individual directors. May I have a motion to nominate the Board of Directors of Stella-Jones.

[Interpreted] Ms. Chairman, my name is Richard Cuddihy and d I propose Michelle Banik, Robert Coallier, Anne E. Giardini, Karen Laflamme, Katherine A. Lehman, Douglas Muzyka, Simon Pelletier and Eric Vachon as directors of the company until the next annual meeting of shareholders, or until their successors are elected or appointed.

Madam Chair. My name is [indiscernible] and I second the motion.

Thank you both. Madam Secretary, are there any questions? Or are there any further nominations?

[Interpreted] We have not have any questions, Madam Chair and no candidate was proposed on the electronic platform.

I declare that the nomination period is now closed. We will now vote. If you are a registered shareholder or duly appointed proxy holder attending virtually, you may vote using the platform. If you're a registered shareholder or duly appointed proxy holder attending in person, please use your tablet to vote. We will announce the preliminary results of voting on this election later in the meeting. [Voting]

The next item of business is the appointment of auditors for the following fiscal year. On recommendation of the Audit Committee, the Board of Directors recommends that PricewaterhouseCoopers LLP be appointed as the auditors of the corporation. I will now entertain a motion regarding the appointment of the auditors.

[Interpreted] Madam Chair. My name is Mathieu Hebert and I move that PricewaterhouseCoopers LLP be appointed auditors of the company until the next meeting of annual shareholders and that their remuneration be determined by the Board of Directors.

[Interpreted] Madam Chair, my name is [indiscernible], and I second the motion. Thank you.

Madam Secretary, are there any questions on this matter?

There are no questions.

Thank you. We will now vote. If you are a registered shareholder, a duly appointed proxy holder attending virtually, please vote using the platform. If you're a registered shareholder or duly appointed proxy holder attending in person, please use your tablet to vote. [Voting]

We will now consider the next item on our agenda. I will now entertain a motion regarding the advisory vote on the corporation's approach to executive compensation, please.

Madam Chair, my name is Rhiannah Carver, and I move that the resolution in favor of the corporation's approach to executive compensation as set out in the corporation's management proxy circular be accepted.

[Interpreted] Madam Chair, my name is [indiscernible], and I second this motion.

Madam Secretary, are there any questions on this motion?

[Interpreted] We have no questions.

Thank you. We will now vote if you are a registered shareholder or duly appointed proxy holder attending virtually, you may vote using the platform. If you're a registered shareholder, a duly appointed proxy holder attending in person, please use your tablet to vote. Since we've covered all of the topics on the meeting agenda, we will now take a short break in order to allow registered shareholders and proxy holders to vote if they have not already done so. I remind you that if you have already voted by proxy, it is not necessary to vote again. [Voting]

As the voting platform is now closed, and all electronic ballots have been submitted and tabulated, I call upon the scrutineer Steve Gilbert to please present the preliminary results of the vote.

[Interpreted] Madam Chair, we report that at least 98% of all votes attached to the common shares represented at this meeting have been cast in favor of the election of each person proposed as a director.

Thank you very much. I therefore declare those nominated to be duly elected as directors of the corporation until the next election of the directors, or until their successors are elected or appointed. Detailed voting results will be published by press release subsequent to the meeting.

Madam Chair, we report that 98% of all common shares represented at this meeting were voted in favor of the appointment of PricewaterhouseCoopers LLP as auditors of the corporation and in favor of the determination of the remuneration by the Board of Directors.

Thank you. Since that resolution has been duly passed, I hereby declare that PricewaterhouseCoopers LLP be appointed the auditors of the corporation, holding office until the close of the next General -- Annual General Meeting of Shareholders and that the remuneration to that effect be determined by the Board of Directors.

[Interpreted] Madam Chair, we report that 88% of all common shares represented at this meeting were voted in favor of the company's approach to executive compensation as set out in the company's management proxy circular distributed to shareholders prior to this meeting.

Thank you very much. Since the resolution has been passed by a majority of the votes cast by the holders of common shares entitled to vote on this resolution I hereby declare that the motion in favor of the corporation's approach to executive compensation be carried. The final voting results for each of these matters will be filed on SEDAR+ as soon as they are available. As we've completed the business portion of this meeting, I now declare the formal portion of the Annual Meeting of Shareholders terminated. And at this time, I welcome Mr. Eric Vachon, who will present an overview of the corporation's activities in 2024, and Ms. Silvana Travaglini will follow with the presentation of the financial overview. Eric?

Thank you, Kate. [Foreign Language]. Good morning, everyone. [Foreign Language] And welcome to Stella-Jones' Annual Meeting of Shareholders. Its a pleasure to be here, not because we're coming back on to this remarkable year, but also because we're going to look at both the fascinating opportunities that we have in front of us. Stella-Jones achieved another solid year of performance in 2024 despite some sales headwinds in our sales figures. We achieved our 24th consecutive year of sales growth, generating revenues of $3.5 billion, increasing EBITDA and maintaining an EBITDA margin of over 18%. In addition, we generated strong cash flows, maintained a prudent capital allocation strategy, which has allowed us to continue to invest in growth and return capital to shareholders. This sustained performance testifies to our ability to take advantage of favorable market trends as well as to the expertise of our teams. Our successes in 2024 in each of our key business sectors position us well for favorable and sustainable growth. Let us take a few moments to go over our product category's performance in 2024. For utility poles, we broadened our customer base and secured several new long-term sales contracts. Our commitment to supply high-quality products on schedule is backed by an extensive procurement and manufacturing capabilities, along with a robust coast-to-coast distribution network. In 2024, we completed our growth capital expenditure program. We now have a footprint that is wider reaching and more flexible, allowing us to be more competitive and to increase our output as needed. We also have invested in new treating assets for railway ties and enhance capacity and optimize our operations, driving greater efficiency. We are committed to providing consistent support and better servicing railroads throughout the continent. In 2024, our residential lumber product category continued to serve its customers with the leading service it is known for, delivering the highest level of order fulfillment rates to the lumber industry in our company's history, thanks to investments in our distribution capabilities across Canada. With a successful 2024 behind us, and with 2025 now well underway, we believe Stella-Jones is primed for future growth. Sustainability remains a core tenet of our company strategy. Over the past year, we've made considerable progress in our greenhouse gas emissions reductions journey by implementing various initiatives, including the finalization of our second solar panel installation in Cameron, Wisconsin, and the purchase of renewal energy credits. These initiatives will help us achieve our 32% GHG emissions reduction as objective by 2030. In late 2024, we commenced our engagement activities with 5 indigenous bands in British Columbia, focused on working towards mutually beneficial relationship agreements. This process is additional to the ongoing engagement our team has historically undertaken as part of our forest stewardship activities in British Columbia where we work to ensure indigenous values are represented in our forest management practices. On the responsible procurement front, we expanded our supply chain due diligence framework, evaluating 25% of our suppliers across 18 critical metrics, resulting in a comprehensive risk rating. This process provides a deeper understanding of our supply chain's business practices and will be built upon for future supplier engagement activities. [Foreign Language] Prioritizing the safety and well being of our employees is another key element of our sustainability strategy. As we continue to improve our environment, health and safety, or EHS programs I'd like to highlight some of our facilities, which over the past year achieved outstanding safety performance and a perfect EHS scorecard, underscoring our commitment to the ongoing progress of our EHS programs and initiatives. Congratulations to these 9 facilities, which represents one of our core values, caring. Earlier today, Stella-Jones announced a definitive agreement to purchase Locweld a leading designer and manufacturer of lattice transmission towers and steel transmission poles for a consideration of $58 million. This transaction is expected to be completed later today. Founded in 1947 and located in Candiac, Quebec, Locweld's core business is dedicated to serving major electrical utilities across North America. Since its inception, Locweld has manufactured more than 100,000 lattice towers, which represents over 32,000 kilometers of transmission line. Their deep industry knowledge will be invaluable to us as we enter a market that complements our existing offering and provides new growth opportunities. Let us please take a moment to look at the scale of these transmission structures that help connect our communities. I hope you agree with me that these structures are definitely very impressive. Members of Locweld senior management team are with us today. And I would like to take this opportunity to welcome them to their new roles within Stella-Jones team. Joining us today at the meeting are Pierre Lavoie, General Manager; Terry Gilliland, Director of Operations; and Deanne Cyr, Director of Sales and estimation. With Pierre, Terry and Deanne approximately 220 Locweld employees will join our fold. We look forward to working with the entire Locweld team and leveraging our combined strengths to add value to our existing customer base. The acquisition of Locweld aligns with Stella-Jones long-term growth strategy, driving -- driven by our vision of being a partner of choice for infrastructure customers. Locweld's products allow us to enter the high-voltage transmission project space which is unsuitable to our wood pole business. Together with Locweld, Stella-Jones will leverage its expansive sales and distribution network to offer a more comprehensive suite of products to its customers. Along with the acquisition, Stella-Jones plans to invest approximately $15 million to enhance the facility's current capacity, underscoring our commitment to establish and scale our presence in the steel transmission structure market. The initiatives undertook this year in our core businesses as well as the Locweld acquisition are key to positioning our business for long-term success. By strengthening our customer relationships, focusing on sustainability, and expanding our reach in growing complementary markets, we are building the solid foundation for future growth, and I'm excited about what lays ahead of us. With this, I will now ask Silvana Travaglini, our Senior Vice President and Chief Financial Officer, to provide details about Stella-Jones financial performance.

Thank you, Eric. Good morning, everyone. Stella-Jones delivered another year of sales and EBITDA growth. Our 2024 financial performance speaks to the strength of our underlying business and the success of our capital deployment initiatives. Let me review some key highlights from 2024. Sales for the year stood at $3.5 billion, an increase of 5% compared to 2023. This increase was driven by a 6% organic sales growth for both utility poles and railway ties. Led by this increase, EBITDA improved by 4% to $633 million, or 18.2% of sales following a record 36% increase in EBITDA in 2023. Net income for the year decreased slightly from $326 million to $319 million in 2024, but earnings per share increased to $5.66, benefiting from our normal course issuer bid program. During the fourth quarter of 2024, we initiated another normal course issuer bid as part of our strategy to return capital to shareholders. During 2024, we generated strong cash from operations of $408 million. We deployed the cash generated to invest in our network, complete our growth CapEx and return $153 million to shareholders. The shareholders are a fundamental pillar of our capital allocation strategy. In addition to share buybacks in 2024, we increased our dividend payout by 22% to reach $1.12 per share. And in light of the company's continued profitability, its quarterly dividend was increased by 11% in the first quarter of 2025 to $0.31 per share. This marks our 21st consecutive annual dividend increase. In October, we bolstered our strong financial position and flexibility with an inaugural bond offering of $400 million for 7 years, using the proceeds to repay the amounts outstanding on our revolving credit facilities. We ended the year with over $800 million in available liquidity and a net debt-to-EBITDA ratio of 2.6x. The leverage ratio deviated slightly above our target range as the appreciation of the closing U.S. dollar, relative to the Canadian dollar resulted in a higher value of the company's net debt denominated in U.S. dollars. With a focus on profitability and working capital management, we expect to reduce the leverage ratio within the desired target range in 2025. We continue to maintain a solid financial position and the necessary financial flexibility to enable to -- for us to pursue our investments and to meet our working capital requirements. Now turning to the results of the first quarter, which we published earlier this morning. Sales for the first quarter stood at $773 million, down 5% on an organic basis, largely due to lower volumes. Despite the softer volumes, we continued to deliver a strong EBITDA margin. Excluding the impact of an insurance settlement of $38 million, the first quarter EBITDA was $141 million, or 18.2% of sales, in line with the margin we have generated over the last 2 years. We remain committed to a balanced approach to capital allocation. Since the end of Q1 last year, we generated cash from operations of about $450 million, deploying about $145 million towards investing in our business and a similar amount of about $150 million to shareholders' return. The remaining capital of $155 million was used to bolster our liquidity. Including the $15 million worth of shares redeemed -- or repurchased in the first quarter, the dividends declared in February have returned $380 million of capital to shareholders out of the $500 million to which we have committed for the period 2023, 2025. And yesterday, our Board of Directors approved a quarterly dividend of $0.31 per share, demonstrating continued confidence in the long-term fundamentals of our business. Our strong balance sheet allows us to execute on strategic initiatives like Locweld and to continue to pursue value-accretive acquisitions core to our growth strategy. In summary, with the strength of our business, our healthy financial position and strong cash generating ability, Stella-Jones is well positioned for continued growth and success in 2025. With that, I will pass it back on to Eric for his concluding remarks.

Thank you, Silvana. From treated wood products to steel structures, our products are vital to the development, strengthening and maintenance of critical electrical infrastructure, and transportation systems across North America. In our efforts to continue to position ourselves as a partner of choice to our infrastructure customers, we will be looking to do more strategic acquisitions that complement and enhance our portfolio. And we'll prioritize opportunities with earnings growth potential that ensure a healthy return on investment for our business. Stella- Jones connects communities and economies across the continent through its products that support our collective and everyday energy, telecommunication and rail transportation needs. We are the backbone of solid infrastructure for stronger communities. As we have entered the final year of our 3-year financial plan, we remain confident in our ability to meet our financial objectives. We are dedicated to continue to lead our business with discipline to deliver value to our shareholders. To this end, we look forward to unveiling updated objectives at our upcoming investor event slated for later this year. I would like to express my sincere gratitude to our more than 3,200 employees across the continent for their commitment, which is ongoing as they give the best of themselves every single day. I would also like to thank the Board of Directors for their guidance, strategic direction and our shareholders for their continued confidence in Stella-Jones. I'll hand the meeting back over to Kate, thank you.

Thank you Silvana. Thank you, Eric. I now invite shareholders or duly appointed proxy holders in the audience wishing to ask a question to please step up to the microphone, state your name and whether you're a shareholder or proxy holder. I will also invite those asking questions virtually through the portal to please select the question or messaging tab that now appears on your screen. Type your question in the text box provided and click the send button. Confirmation will appear on your screen that your message has been received. For those asking questions through the portal, Ms. Marla Eichenbaum will be reading them out loud as well as the name of the individual who has asked the question, if provided. Questions that have already been asked or answered will not be addressed. We will now begin receiving questions.

[Interpreted] I'm a long-term shareholder, you can answer in French or in English. First of all, congratulations for the acquisition. I'd like to see that the company is in a high and has a lot of growth plans. My question is with regards to competition and Stella-Jones competitive advantage. If I was a customer looking for a choice partner, as you said, why would I pick Stella-Jones and not one of your competitors?

[Interpreted] Thank you for your question. Since you asked in French, I'll answer in French. There are a few attributes and they are important to our organization. First of all, there is the size of our company, 44 plants, a well-established network with suppliers across North America. And so using the strength of the network is important. In real time, I would say that some time when we look at things that have an impact on us, we sometimes -- we need to continue to support communities in their electricity. We have also been very careful with our capital allocation. Our balance sheet is well capitalized and strong and we can -- we are very agile. I would also say that one of the key elements as well is our capacity to supply. We serve more than 2,000 clients across North American electricity, we serve all of the big railroads in North America. And so we support a lot of our capacity to support in raw material sufficiently to ensure that services continue for our clients is essential, and we are very much capable of doing that. Silvana, do you have anything to add? No. Okay. So those are the 3 points then. Thank you very much and continue your good work.

[Interpreted] Hello, I am a shareholder. Do you think that Trump's tariffs will have a big impact on sales over the next year?

[Interpreted] Thank you for your question. We're in a very unique and privileged position, I would say. What we produce in each respective country was supplied and distributed in the same country. So we don't have many over-border transactions. Very few imports and exports within the organization. So from that point of view, I would say that Trump tariffs will be very minimal. However, if we look more closely, there are some products that when we look at wood preservatives, we do need supplies from Asian countries, but the impact remains minimal.

My name is William [indiscernible]. I'm a shareholder. And I was wondering in terms of backward integration risks from your consumers, in terms of we saw the railway ties that one consumer decided to internalize production. I was wondering in the utility pole business, is there -- are there companies or consumers that have internal production? And do you see any risks to backward integration in that segment?

Great. Great question, Mr. [indiscernible]. So there are no utilities in North America that have their own manufacturing capabilities for utility poles. And I would argue probably for any the components they acquire. Utilities, in general, manage significant projects over several decades. And they're actually seeking for companies that will actually help them consolidate their supplier base more than wanting to invest themselves in production capacity into assets that I would personally qualify probably not as strategic for their capital allocation. So I think from that perspective, we're very well positioned. And the acquisition we made today of Locweld and adding steel transmission structures to our portfolio actually is a good example of a supplier wanting to consolidate their offerings to the utility industry.

May I ask two more questions. The other one is the new acquisition that you just made. I was wondering if you had any -- you probably have. But if you could disclose those short-term objectives, and longer-term objectives for that business in terms of growth, in terms of profitability and where do you want to take that business?

Certainly. I can differently share a few things. So if we -- if we think about one of the graphs we saw earlier this morning that shows that the transmission space in North America is in large proportion occupied by steel products, 88% actually. So there's definitely a great opportunity for us to enter ourselves in that market. And we're definitely thinking about opportunities going forward. In the very, very short term, as I mentioned in my prepared notes, we will be investing $15 million, more or less. Probably even a little more in capital expenditures. Our plan is to double the capacity of that facility. The sales team at Locweld, Ms. Cyr, has done an excellent job over selling the capacity here for the next couple of years. So we're going into this investment wide open and knowing very well that we have an opportunity to seize there. Going forward, we definitely have a thought on future expansion, a bit of a road map, if you want. And at this point, I'll say a bit more vague, but opportunities to expand the businesses either through M&A or through building capacity. So we're definitely exploring all those avenues for our market that is so big as $5 billion in annual sales, we'll definitely do our very best to get our fair share of that market.

And the last question, which is maybe two, and I want to maximize my opportunity here. But the -- in terms of that new business, how is it different in terms of your advantages or disadvantages than the current utility pole business? So how does that business differ from the current business you have?

Another great question. So when you take a look at our utility pole sales, 80% of what we do is what I'll qualify as distribution. So those would be -- for that are 40 to 50 feet in height that you find in your local neighborhoods in suburbs and so on. 20% of what we sell is dedicated for transmission products. However, the tallest pole we can find and sell to customers would be probably 90 to 100 feet. When you think about transmission lines and the products that Locweld manufacture, we're talking about very high voltage. So therefore, the clearance from the ground and the clearance between the cable themselves is very important. Therefore, you can imagine when you see these steel towers that look like giants with just expanding those cables is a very good reason for that. So our utility poles can now offer that characteristic. So it's not competing. It's actually definitely complementary to what we do. And again, what we saw earlier this morning, you could -- if you noticed that the wood space in transmission is the smallest sliver in the pie chart versus the 88% that now we have access to. So definitely very complementary and definitely with the acquisition of Locweld and their management team that will be accompanying us for several years gives me a lot of confidence that we can keep building this business and keep growing it for several years to come.

Okay. And in terms of the question that the other shareholder has I thought it was interesting. I was just wondering, maybe more, it's hard for me to find information about, for instance, market share on the utility pole and the railway ties. I was wondering what are management estimates of market share and what are the largest competitors that you have in our customers, for instance, segmenting their business between 2 customers? Or do you usually have exclusivity with the customer in terms of delivery and business you do with them?

A lot to unpack in that question. Happy to answer. So we -- so you're right. Information about market is hard to find. There is a website for an association, which called the Railway Tie Association. So they would provide a bit of the size of the market, if you want. There's no such association that exists for utility poles. Now we do have our internal numbers on market share and so on, which we don't disclose for several good reasons actually. But I can also share with you that this space is very unique as we've been consolidating over the years and have acquired a lot of smaller and larger players. We have built ourselves a very strong position in the North American market, which brings our customers to think who do you want to work with. So in many cases, we have long-term agreements, both for railroads and utilities that span -- so railroads could be 3 to 5 years and utilities will be -- could be 5 years, we had contracts that go up to 10 years and plus. So because of our size and scale and scope of what we can offer our customers sort of defer to who can best service them, who can provide quality and quantity on a consistent basis. And that's what we do, and that's what we're known for. So we're very good at manufacturing, but we're also very good at ensuring our customers don't wake up in the morning and think that, oh, I need to do this product, but Stella-Jones didn't deliver the products. And then I have a problem. So that's our success is when we -- our customers don't complain and don't worry about what we can do for them.

Maybe I could just add one for the utility poles. Just also Keep in mind, we are probably the only -- we are the only supplier that services all of North America. Most of our competitors are very regional players. So that just think of that piece.

Are there any other questions from the electronic portal?

Madam chair, there are none on the electronic portal.

Excellent. As there are no more questions, this concludes our Annual Meeting of Shareholders. We'll be pleased to meet with our in-person guests and press at this time, and we hope to see you again at next year's meeting. Thank you all for joining us here today, and thank you for your support of Stella-Jones. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]